M&AFINANCE

KEY ASSESS

MARKETDEALS

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FINDINGS

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NORTH AMERICA

HURDLES

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DIRECTION

NEW YEAR

DATATIM

EPREDIC

TION

PRIVATE EQUITY

COMPANIES

RISKS

INDIC

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INDUSTRY

LIFE SCIENCES & HEALC

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PHARMA

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DEALMAKING

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ILLUSTRATE

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SURVEYFUTURE

ECONOMY

2016

VENUE® Market Spotlight

2016 OUTLOOK December 2015 Edition

VENUE® Market Spotlight: 2016 Outlook

CONTENTSWelcome 3

Foreword 4

Survey 5

Notable Deals in the room 8

About RR Donnelley 11

3

WELCOMEDear Valued Reader,

Welcome to the December 2015 edition of the Venue Market Spotlight. In this edition, we will examine the prospects for M&A in 2016 after a record high in transaction values this year.

Global M&A activity set a breakneck pace over the first three quarters of 2015, with total deal value of US$2.88tn, a 21% increase over the same period of 2014. In late November, this year officially became the biggest-ever in deal history. The technology, media, and telecoms sector led the way with US$537.4bn-worth of deals, while North America dominated in terms of geography, seeing US$1.52tn in transactions, or more than half the global total.

Cheap capital, the slump in energy prices, and firms’ desire to expand amid slow global growth have contributed to this banner year for deals. Strategic buyers have been able to finance acquisitions with relative ease and private equity groups have sought returns for investors hungry to put their money to work.

This deal-making boom is set to continue into 2016, according to respondents in this month’s Spotlight. Companies will seek to diversify their geographic and sector presence due to volatility, while continuing to take advantage of affordable loan options. After a slow year for IPOs, respondents said the markets will pick up somewhat, and private equity is expected to be even more active. Yet market participants warn that M&A activity could face headwinds due to the Chinese slowdown, problems in the EU, and the recently announced hike in U.S. interest rates.

As always, please enjoy this month’s Spotlight.

Sincerely,

Tom JuhasePresident, Financial Services Group

VENUE® Market Spotlight: 2016 Outlook

FOREWORDGlobal deal value reached US$3.88tn in the first 11 months of 2015, surpassing the value of deals over all 12 months of 2014. And as the year comes to a close, deal-making has stepped on the accelerator, with four mega deals each worth more than US$50bn, capped by Pfizer’s US$183.7bn proposed acquisition of Allergan. Deal volume has dipped slightly, seeing a 2.6% decrease year over year in the first three quarters of 2015.

Consolidation activity ramped up across the healthcare sector, especially in the US as the Affordable Care Act continues to roll out. This helped cause deal value to more than double in North America to US$273.8bn in Q1-Q3 2015. The downswing in oil and gas prices has led to a boom in energy deals, which rose 14.3% in value globally in the first three quarters of 2015. Regionally, Asia-Pacific continued to emerge as a top target for deals, which increased 13% in overall value and 47% in quantity year-on-year through three quarters.

Our respondents to this month’s Spotlight expect those trends to continue into 2016. Eighty-eight percent of survey respondents said M&A activity would increase next year, while 12% thought it would remain the same and no one predicted a downtick.

Other key findings include:

Market participants are aware of the challenges presented by the slowdown in emerging economies and an uncertain outlook for Europe as they head into the new year. However, rising pressure to keep pace with merging competitors and to shore up balance sheets could create a fertile environment for deals.

North America remains a center of focus for deals. Seventy- six percent of survey respondents said the region would receive even more attention in 2016, while 60% said activity would increase in Asia-Pacific.

Respondents anticipate continued high M&A volume in the technology sector, with 64% saying it will receive more attention in 2016. Forty-eight percent said the consumer sector would be in dealmakers’ sights and 36% thought the energy, mining and utilities sector would gain in attention.

Private equity activity is expected to expand further in 2016. Eighty-six percent of those surveyed said PE deal-making would increase, and 20% said it would rise significantly.

Respondents anticipate high M&A volume in the TMT sector, with 64% saying it will receive more attention in 2016.

5

What do you think will happen to overall M&A activity in 2016?

The vast majority of respondents expect deal-making to grow in 2016. A total of 88% think overall M&A activity will increase next year, with 40% believing the rise will be significant. Further, no one thinks activity will decline. A major reason for the expected upturn is that companies will seek profits they cannot obtain in their home markets, says the Director of Strategy for a corporate: “The need to benefit from investing in a market where the growth rate is better than the domestic market will drive M&A activity next year, along with the need to gain experience in other sectors.”

One respondent, however, said deal-making would stay flat due to the negative effects of global upheaval. “Europe will continue to be in debt pressure and the crises over Russia and Syria are not going to come down in 2016,” said the Director of Strategy at a corporate. “Companies cannot ignore these issues and there will be slow movement in M&A.”

Which geographies do you think will receive more attention in terms of M&A in 2016 compared with 2015? (select top two)

Overall, 76% of respondents said North America would receive more M&A attention in 2016 and 60% said Asia-Pacific would make gains, while only 28% said the focus on Europe would grow.

The complex situation in Europe was cited by some respondents,who predicted that other regions would outpace it in terms of tie ups. On top of this, strong growth in the US is expected to be a catalyst for dealmaking in the region. “Asian markets are still doing well and there is robust growth, though the Chinese slowdown has concerned many,” said the Managing Director at an investment bank. “North American countries are strong with their recovery and we will see businesses being aggressive in getting growth through M&A to lead the competition.”

Africa and Latin America were perceived as being less likely to receive the attention of deal-makers next year, with 24% of respondents predicting more robust activity in Africa in 2016 and 12% choosing Latin America. The Managing Director at an investment bank said deal-making would accelerate in Latin America due to cheap acquisition opportunities: “The Latin American markets will get more M&A activity in 2016 as valuations are low and investor-friendly policies have added to the region’s attractiveness for investors.”

SURVEY

Remain same

Increase somewhat

Increase significantly

12%

48%

40%

THE VAST MAJORITY OF RESPONDENTS EXPECT DEAL-MAKING TO GROW IN 2016

0 10 20 30 40 50 60 70 80

Latin America

Africa

Europe

Asia-Pacific

North America 76%

60%

28%

24%

12%

VENUE® Market Spotlight: 2016 Outlook

Which sectors do you think will receive more attention in terms of M&A in 2016 compared with 2015? (select top two)

Nearly two-thirds of respondents (64%) said the technology, media, and telecoms sector would make further gains in terms of M&A activity next year. As consumers become accustomed to higher standards of technology goods, firms will seek to meet those needs through targeted investments, says a Partner at a private equity (PE) firm: “The demand for telecommunication and technology has really increased in the last few years, boosted by demand for better phones and a faster internet.”

Almost half of respondents (48%) predicted the consumer sector would gain more attention, while 28% said deal-making could increase in the pharma, medical and biotech (PMB) sector, especially in the markets of emerging Africa and Asia. “PMB will be majorly targeted for M&A activities next year based on unmet needs in regions such as Africa and the need to transform the public healthcare system in Asian countries,” said a Partner at a PE firm.

SURVEY (CONTINUED)

What, if any, would be the biggest challenges facing M&A in 2016? (select top two)

Respondents were split on the biggest challenges likely to face M&A in 2016. Sixty percent singled out both lagging growth in emerging markets and the murky outlook for Europe as probable obstacles to deal-making. “The uncertainty in Europe, both because of the current issues of migrants and due to the uncertainty in the economy fueled by the recession in China, will be a problem for businesses in the future,” says the Director of Strategy at a corporate.

In the opinion of 40% of respondents each, M&A will be affected by rising interest rates and political instability. As the cost of borrowing goes up over the course of the year, companies may need to narrow the scope of their M&A plans, says the Managing Director of an investment bank: “Rising interest rates will be the biggest challenge facing M&A in 2016, as opportunistic businesses may not be able to easily raise capital, even if there are factors proving they were the right buyers.”

0 10 20 30 40 50 60 70

Industrials andchemicals

Financial services

Pharma, medicaland biotech

Energy, miningand utilities

Consumer

TMT 64%

48%

36%

28%

8%

16%

0 10 20 30 40 50 60 70

Politicaluncertainty

Rising interestrates

Uncertaintyin Europe

Sluggishemerging

markets60%

40%

60%

40%

FIRMS WILL MEET DEMAND FOR TECHNOLOGY THROUGH

TARGETED INVESTMENTS

7

How will IPO markets fare in 2016, compared with 2015?

There is broad optimism among respondents that IPO markets will open next year after a decline in public offerings in 2015. Fifty-two percent say IPO markets will open to an extent, while 12% say the improvement will be significant. “IPO markets will open somewhat, as lending policies will change and businesses that want to get into M&A will not be able to fulfill their capital appetite through normal fund-raising options,” says an Executive Vice President at a corporate.

Nearly one-third of respondents (32%) predict no change in the market for public offerings, citing market volatility and firms’ preference to fund expansion by using cash or private debt. Just 4% predicted even worse IPO conditions due to the substantial risks involved. “The conditions are not good currently, companies will not get the value they want, and there is a chance they will make much less than they would have expected,” says the Managing Director at a PE firm.

What do you think will happen to private equity activity in 2016?

The outlook for PE deals is almost universally positive among respondents, with 64% believing PE activity will expand somewhat in 2016 and 20% saying it will grow significantly. After a quiet year for many PE firms, the pressure will increase for them to make decisive moves, says the Managing Director at an investment bank. “I think PE firms lay low in 2015 because of unexpected movements in the market,” he says. “If they do not deploy their capital for another year, limited partners will start questioning them.”

A small proportion of respondents say PE activity will remain the same (12%) or decrease somewhat (4%), due to the possibility of sector-wide shifts in the way deals are struck. “The industry is going through change with investor activism on the rise about fee levels and carried interest calculations,” says the Managing Director of an investment bank, who predicts PE activity will be flat in 2016.

64%

20%12%

4%

32%

52%

12% Remain same

Increase somewhat

Increase significantly

Somewhat close

Remain the same

Somewhat open

Significantly open

THERE IS BROAD OPTIMISM THAT IPO MARKETS WILL OPEN NEXT YEAR

888.773.8379www.rrdonnelley.comwww.venue.rrd.comCopyright © 2015 R. R. Donnelley & Sons Company. All rights reserved.

Corporate Headquarters 35 West Wacker Drive Chicago, IL 60601U.S.A.

Notable deals in the roomVenue® data room: A special report

For more information:Please contact your RR Donnelley Sales Rep.Call 1.888.773.8379

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Osmotica Pharmaceuticals Corp., agrees to acquire

Vertical Pharmaceuticals, Inc.December 4, 2015

Target: Trigen LaboratoriesFinancial Advisor for Buyer: Jefferies LLC Counsel for Buyer: Covington & Burling LLP Private Equity Firm for Seller: Avista Capital Partners, LP Industry: Medical: Pharmaceuticals

Square IPONovember 19, 2015

Issuer: Square Inc.Counsel for Issuer: Wilson Sonsini Goodrich & Rosati, P.C.; Wachtell, Lipton, Rosen & MatzCounsel for Underwriter: Simpson Thacher & Bartlett LLPUnderwriter (s): Goldman, Sachs & Co.; Morgan Stanley; J.P. Morgan; Barclays; Deutsche Bank Securities; Jefferies; RBC Capital Markets; Stifel; LOYAL3 Securities; SMBC NikkoIndustry: Computer services; Computer software; Financial Services; Internet / ecommerce

Axtel and Alestrade Merge

December 4, 2015

Industry: Telecommunications: Carriers

AstraZeneca to acquire ZS Pharma

November 6, 2015

Financial Advisor for Target: Goldman Sachs Counsel for Target: Cleary Gottlieb Steen & Hamilton LLP ; Simpson Thacher & Bartlett LLP Counsel for Buyer: Davis Polk & Wardwell LLP Industry: Biotechnology; Medical: Pharmaceuticals

IBM acquires Cleversafe October 5, 2015

Financial Advisor for Target: Houlihan Lokey Counsel for Buyer: Cravath, Swaine & Moore LLP Private Equity Firm for Seller(s): In-Q-Tel, Inc.; New Enterprise Associates; Motorola Solutions Venture Capital; Harrison Street Real Estate Capital, LLC; Pritzker Group Venture Capital; Alsop Louie Partners; Presidio Ventures, Inc.; OCA Ventures; Batterson Venture Capital, LLCIndustry: Computer services; Data processing; Hardware maintenance

Rapid7 IPOJuly 17, 2015

Issuer: Rapid7Counsel for Issuer: Cooley LLPUnderwriter(s): Morgan Stanley; Barclays; Pacific Crest Securities; William Blair; Raymond James; Cowen and CompanyCounsel for Underwriter: Orrick, Herrington & Sutcliffe LLPIndustry: Computer: Hardware; Computer software

H.J. Heinz Company merges with Kraft Foods Group, Inc.

July 2, 2015

Financial Advisor for Target: Centerview Partners Counsel for Target: Davis Polk & Wardwell LLP; Sullivan & Cromwell LLP Financial Advisor for Buyer: LazardCounsel for Buyer: Cravath, Swaine & Moore LLP; Kirkland & Ellis LLP Industry: Consumer: Foods

Verizon acquires AOLJune 23, 2015

Financial Advisor for Target: Allen & Company LLC Counsel for Target: Wachtell, Lipton, Rosen & Katz; White & Case LLP Financial Advisor for Buyer: Guggenheim Partners, LLC; LionTree Advisors, LLC Counsel for Buyer: Weil Gotshal & Manges LLP Industry: Internet/ecommerce

CVS Pharmacy, Inc. acquires Target Corporation’s pharmacy

and clinic businessesJune 15, 2015

Target: Target Corporation (pharmacy and clinic business)Financial Advisor for Buyer: Barclays Counsel for Buyer: Dechert LLP; Fried Frank Harris Shriver & Jacobson LLP; Simpson Thacher & Bartlett LLP Financial Advisor for Seller: Goldman Sachs Counsel for Target: Dorsey & Whitney LLP; Faegre Baker Daniels LLP; Wachtell, Lipton, Rosen & Katz Industry: Consumer: Retail; Chemists/health

888.773.8379www.rrdonnelley.comwww.venue.rrd.comCopyright © 2015 R. R. Donnelley & Sons Company. All rights reserved.

Corporate Headquarters 35 West Wacker Drive Chicago, IL 60601U.S.A.

Avago Technologies Ltd to acquire Broadcom Corporation

May 28, 2015

Financial Advisor for Target: Evercore Partners Inc; JP MorganCounsel for Target: Davis Polk & Wardwell LLP; Paul Weiss Rifkind Wharton & Garrison LLP; Skadden Arps Slate Meagher & Flom LLP; Sul-livan & Cromwell LLP; WongPartnership LLP Financial Advisor for Buyer: Bank of America Merrill Lynch; Barclays; Citi; Credit Suisse; Deutsche Bank AGCounsel for Buyer: Latham & Watkins LLP; Simpson Thacher & Bartlett LLP Industry: Computer: Semiconductors; Computer software; Telecommunications: Hardware

TerraForm Global, Inc. IPO

May 7, 2015

Issuer: TerraForm Global, Inc. Counsel for Issuer: Kirkland & Ellis LLPCounsel for Underwriter: Latham & Watkins LLPUnderwriter(s): J.P. Morgan; Barclays; Citigroup; Morgan StanleyIndustry: Energy: Electrical power generation; Alternative energy

Twitter acquires TellApart

April 28, 2015

Target: TellApart, Inc.Private Equity Firm for Seller: Bain Capital LLC; Greylock Partners Industry: Internet / ecommerce; Media; Advertising; Search engines and other internet enabling technology

Cigna Corporation acquires QualCare

Alliance Networks, Inc.February 3, 2015

Counsel for Buyer: Cadwalader, Wickersham & Taft LLP; Locke Lord LLP Industry: Financial Services; Medical; Business support services; Health institutions; Insurance related

GoDaddy Inc. IPOApril 1, 2015

Issuer: GoDaddy Inc.Counsel for Issuer: Wilson Sonsini Goodrich & Rosati, P.C.Counsel for Underwriter: Davis Polk & Wardwell LLPUnderwriters: Morgan Stanley; JP Morgan; Citigroup; Barclays; Deutsche Bank Securities; RBC Capital Markets; KKR; Stifel; Piper Jaffray; Oppenheimer & Co.; JMP SecuritiesIndustry: Internet / ecommerce

Hewlett-Packard Company (HP) acquires

Aruba Networks, Inc.March 2, 2015

Financial Advisor for Target: Evercore Partners Inc; Qatalyst GroupCounsel for Target: Shearman & Sterling LLP; Wilson Sonsini Goodrich & Rosati P.C. Financial Advisor for Buyer: BarclaysCounsel for Buyer: Gibson Dunn & Crutcher LLP Industry: Computer software; Telecommu-nications: Hardware

Deals. Done. Simple.

Samsung Electronics acquires LoopPay, Inc.

February 18, 2015

Target: LoopPay, Inc.Counsel for Target: WilmerHale Counsel for Buyer: Skadden Arps Slate Meagher & Flom LLP Private Equity Firm for Seller: Beta Fund Industry: Computer software; Financial Services; Internet/ecommerce; Services (other)

Axis Capital and PartnerRe mergeJanuary 26, 2015

Financial Advisor for Target: Credit Suisse Counsel for Target: Appleby; Davis Polk & Wardwell LLP; Skadden Arps Slate Mea-gher & Flom LLP Financial Advisor for Buyer: Goldman Sachs Counsel for Buyer: Conyers Dill & Pearman; Simpson Thacher & Bartlett LLP Industry: Financial Services; Insurance

Microsoft Corporation acquires

Equivio Inc.January 20, 2015

Industry: Computer software; Application software products; Software development

VENUE® Market Spotlight: 2016 Outlook

11

ABOUT RR DONNELLEY

About Venue

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RR Donnelley is a global provider of integrated communications. Our company works collaboratively with more than 60,000 customers worldwide todevelop custom communications solutions that help to drive top-line growth, reduce costs, enhance ROI and ensure compliance. Drawing on a range of proprietary and commercially available digital and conventional technologies deployed across four continents, the company employs a suite of leading Internet based capabilities and other resources to provide premedia, printing, logistics and business process outsourcing services to clients in virtually every private and public sector.

VENUE® Market Spotlight: 2016 Outlook

VENUE® Market Spotlight: 2016 Outlook